The debt to income ratio is simply a person’s finance measure that is able to compare the money that the person has earned to the amount of money that he owns his creditors. Home loan debt to income ratio calculator can be confusing to some homeowners which is the reason why they should understand what it means to handle their finances perfectly. For a lot of homeowners, this aspect of their finance comes into play when they want to get a new home. The income ratio calculator becomes what they would use in determining their mortgage affordability.

It has been noted that when the finance has been gotten for a new home, a lot of homeowners are not willing to look over and see what else to do with their debt to income ratio. However, this ratio is powerful that it should not be neglected by any homeowner.

The way to calculate the debt to income ratio is not difficult and should not cost you any dime. There are different ways that you can calculate this ratio depending on your debts that has been included in your calculations. Some people can measure their ratio when they compare all their housing debts including their home insurance, mortgage expenses, taxes and other house related expenditures. When this is done, it can be calculated and divided by the gross monthly income.

The next method is to include the whole amount of money that you have spent that month which includes your recurring debts such as car loans, mortgages, credit card payments and child support payments to name a few.

The Significance

When it comes to debt to income ratio, it tells so much about a person’s state of financial status. When you get a lower number, it is an indication that you are on a good footing because you have a less debt. With less debt, you can do so many things with your money. However, when the debt to income ratio is high, it means that you have little money at the end of the month. When do you have a good ratio? This is when you have a 36% debt to income ratio according to traditional lenders and there is no more than a 28% of your debt that is geared towards the servicing of your house mortgage.

Finally, it is good to always look into your finance to ensure that you do not end up in trouble with servicing your home loan.